The Labour party risks getting stuck in an "electoral cul-de-sac" if it takes a "pre-New Labour" direction under its new leader, Lord Mandelson warned today.

His comments were seen as a warning against the election of Ed Miliband, who has positioned himself to the left of his brother David as the pair have emerged as frontrunners to succeed Gordon Brown.

The former business secretary – and architect of New Labour – warned that the party risked a long period in opposition if it swung to the left and failed to recreate the wide-ranging coalition that took Tony Blair to power in 1997.

Mandelson's intervention could give a boost to David Miliband's campaign at the start of the week in which MPs, MEPs, party activists and members of affiliated organisations will start voting in the postal ballot to elect a new leader on 25 September.

The shadow foreign secretary will today seek to build momentum with a call to turn Labour into a "living, breathing movement for change" when he addresses supporters at a Westminster rally.

David Miliband will dismiss David Cameron's "big society", insisting what is needed is the "good society" typified by the community organisers he has been fostering with cash raised for his campaign.

Meanwhile, Ed Milliband has called for Labour to end its caution over tax, telling the Independent newspaper that the balance between public spending cuts and tax increases for the rich should be shifted in favour of public services.

The shadow energy secretary said New Labour had become "ideologically beached" because it was haunted by old ghosts from the past, when the party was viewed as tax-raising and anti-American. Its desire to hide the views of some of its members from voters had led to a damaging "control freak" mentality.

"What always happens in politics is that a generation is shaped by particular events," he said. "Then the danger is that you get stuck in a particular period. What happened to New Labour is that we got stuck – defending flexible labour markets and not understanding the limits to markets at a time when the world had moved on.

"If you don't move with it, we end up being ideologically beached – defending bankers' bonuses, saying you can't have a top rate of tax on earnings above £150,000 and a living wage. You end up being out of touch with the public ... We became overly cautious. Government does that to you."

But speaking to the Times, Mandelson said anyone who tried to take Labour back to the era before Blair's election as leader in 1994 would wreck the party's chances of a swift return to power.

Addressing Ed Miliband's criticisms, the peer said: "I think that if he or anyone else wants to create a pre-New Labour future for the party then he and the rest of them will quickly find that that is an electoral cul-de-sac."

He said Lord Kinnock and Lord Hattersley – the former leader and deputy leader, who have both voiced support for Ed Miliband – wanted to "hark back to a previous age".

"We're a political party, not a church, and we require the support of voters actively to embrace us, and if we stop recognising that, then we're going to be taken back into those long years of opposition that served us and the country so ill.

"If you shut the door on New Labour you're effectively slamming the door in the faces of millions of voters who voted for our party."

Ed Miliband suggested Labour could raise £5bn from the banks by making the one-off tax on bonuses permanent and introducing a levy on the industry and a tax on financial transactions. But he said any tax changes should not hit ordinary families.

David Miliband is today expected to use his speech to brand Cameron's vision of a big society as no more than a recipe for a "do-it-yourself society".

"Thanks to a Labour government, people in this country have come to expect more. Cameron is offering them less. I don't want a big society, I want a good society," the shadow foreign secretary will say.

That means "good schools, good hospitals, good policing, good estates, good Sure Start programmes, good housing, good childcare".

"But most of all, the good society is built on people, decent people, inspiring people, like all of you in this hall today – good people doing good deeds.

"I want the Labour party to be a living, breathing movement for change in every community up and down the country."

David Miliband will criticise the previous Labour leadership for failing to pay enough attention to grassroots organisation, calling on it to adopt the community organising spirit harnessed by Barack Obama in his successful run for the US presidency.

"Let us say to the government: this is the real coalition in Britain today – a coalition of the people, not a coalition of cuts and convenience, not a coalition without principle or morality, but a coalition of people fighting for fairness, fighting for dignity, fighting for safety, fighting to put power, wealth and opportunity in the hands of the many, not the few, fighting for the good society."